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No Standing to Sue, AAEM Presses on Against TeamHealth

The American Academy of Emergency Medicine and two emergency physicians have no standing to sue TeamHealth over its contract with the Memorial Hermann Health Care System, according to recent rulings by both the First Court of Appeals and the state district trial court that heard the case. But Robert McNamara, MD, an AAEM founder, said the academy would appeal to the Texas Supreme Court, asking it to consider whether a contract between the physician contract management group, ACS Primary Care Physicians, TeamHealth West, and the Memorial Hermann Health Care System violates the state's formidable rules against the corporate practice of medicine.

“The Appeals Court said it is not the proper venue to hear issues related to the corporate practice of medicine,” said Dr. McNamara. “The matter itself has not been decided, right or wrong. It has not been heard. The court said we should take the matter to the Texas State Board of Medical Examiners. It's a route to consider, but we feel that the court is the proper venue. We will exhaust that pathway first.”

The suit has divided players in the Texas health care arena. The powerful Texas Medical Association has filed an amicus brief on behalf of the physicians, AAEM, and its Texas chapter. The Texas Hospital Association (THA) filed a brief on behalf of Memorial Hermann Health Care System, Team Health, and ACS Primary Care Physicians Southwest.

A spokeswoman for TeamHealth said the organization would have no comment because the matter remains in litigation. The suit challenges a contract under which physician-owned ACS Primary Care Physicians provides emergency medicine services at eight Memorial Hermann hospitals. ACS Primary Care Physicians contracts with private physicians to provide the services at the hospital, and TeamHealth provides management services and assists with physician staffing, said Robert Joyner, TeamHealth's executive vice president and general counsel in an interview that took place before the Appeals Court decision.

At the heart of the suit is the corporate practice of medicine, with AAEM and the physicians saying that ACS Primary Care Physicians Southwest is a shell company for TeamHealth meant to circumvent the rules against the corporate practice of medicine in Texas. The plaintiffs said the physician-owned group allowed TeamHealth and its subsidiary TeamHealth West to employ physicians, obtain contracts to provide physician and emergency services to hospitals, and to split physician fees illegally. As a for-profit corporation that is not owned by physicians, TeamHealth cannot directly employ physicians in Texas.

The two physicians named in the suit, Crystal Cassidy, MD, and Joseph Ybarra, MD, faced the prospect of signing contracts that would put them at odds with the Texas law, said Dr. McNamara. Dr. Cassidy had worked at a Memorial Hermann previously, but was hesitant to sign a contract that she thought would conflict with the law, said Dr. McNamara. Dr. Ybarra had signed a contract, but then realized that it was in conflict with Texas law.

In its amicus brief, the Texas Medical Association (TMA) asked the Appeals Court to overturn the trial court ruling. Its attorneys wrote that the opinion on standing “is problematic for physicians attempting to comply with Texas law because it improperly restricts the use of a fundamental means of examining the legality of contracts suspected of violating the corporate practice of medicine prohibition, namely the civil court system through a declaratory judgment action.”

The brief notes that “only ‘persons' are eligible to obtain licenses to practice medicine in Texas. That goes hand in hand with the notion that only individuals, not corporations, are capable of meeting certain moral fitness requirements and of being appropriately disciplined by the state's regulatory body (i.e., the Texas Medical Board) for acts constituting the practice of medicine.” The TMA brief notes that the organization believes that AAEM and its cohorts have standing in the matter.

“If the Trial Court's opinion stands, it effectively removes much of the teeth of the prohibition on the corporate practice of medicine by limiting judicial examination of alleged violations,” the brief states. “Without judicial intervention and recourse through the formal discovery process, many corporations may be able to shield discovery and proof of violations of the corporate practice of medicine prohibition by current or prospective contracting parties (including physicians) through the artful drafting and/or structuring of their contractual arrangements. Further, physicians seeking to comply with the prohibition on the corporate practice of medicine may unwittingly violate the law without proper guidance through the court system, thereby placing their licenses at risk of adverse action by the Texas Medical Board. In the end, both physicians and patients may be harmed by the lack of judicial examination of alleged violations of the corporate practice of medicine doctrine. Conversely, only the bottom line of corporations will be served if the Trial Court's ruling is upheld. Surely, this was not the result anticipated or intended by standing laws.”

In its brief, TMA holds:

▪ That AAEM, its Texas chapter, and the individual physicians have proved standing and properly pleaded their case.

▪ The law should enable physicians and professional societies to untangle the complex structure of contractual arrangement to discover and prove violations of the corporate practice of medicine statute.

▪ If physicians and professional societies do not have standing in declaratory judgment actions, it creates disequilibrium in the enforcement of actions against the corporate practice of medicine. The Texas Attorney General could only act if there were a complaint about a contract, and physicians in the contractual arrangement are unlikely to complain because of the negative effect on their licenses and incomes. The Texas Medical Board can only act against a physician who enters into the negative contract, not the corporation.

In its amicus brief for the other side, the Texas Hospital Association notes that physicians can hire legal counsel to advise them on contracts and whether they violate the state prohibition on the corporate practice of medicine. They also can complain to the Texas Medical Board or the Attorney General, said the THA.

In the brief, THA holds:

▪ Hospitals have to provide or arrange for the delivery of health care services to patients, including physician services such as emergency treatment. To do so, it notes, hospitals frequently contract with physician management companies that contract with or employ physicians to provide hospital services, and opening the door to court challenges of such contracts “could cause confusing and uncertainty in physician staff in hospitals on a large scale in Texas and should be avoided.”

▪ The parties — AAEM, the Texas Chapter, and the two doctors — have not appropriately pled or offered proof of standing in the case.

▪ They have other options or remedies to address concerns about the contracts, and the THA disagrees that either the state Attorney General or the Texas Medical Board are unlikely to take action.

Dr. McNamara said AAEM will continue to fight for the matter to be heard. “It's a delay in an important issue,” he said.

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